President Obama signed a new stimulus bill into law on Feb. 17 that includes more than $300 billion in tax incentives. The bill, the American Recovery and Reinvestment Tax Act of 2009, includes sizable packages of changes for both individuals and Hawaii businesses.

The bill contains a wide range of tax relief for low- and moderate-income wage earners, and taxpayers with home and car purchases.

The "Making Work Pay" credit provides individuals with a tax credit in the amount of 6.2 percent of earned income, not to exceed $400 for singles and $800 for joint returns in 2009 and 2010. The credit is phased out at adjusted gross income in excess of $75,000 ($150,000 for married couples filing joint returns). The credit can be claimed as a reduction in the amount of income tax that is withheld from a paycheck, or through a credit on a tax return. Due to the credit, workers can expect to see perhaps $13 a week less withheld from their paychecks starting in April or sooner. In 2010, the extra take home pay will be adjusted to around $7.70 per week.

The new law also provides for a one-time payment of $250 to retirees, disabled individuals, Railroad Retirement beneficiaries, those receiving benefits from the Social Security Administration and veterans receiving disability-compensation and pension benefits from the U.S. Department of Veterans Affairs. Certain government retirees who are not eligible for Social Security benefits are allowed a one-time refundable tax credit of $250 in 2009. This one-time payment (or credit) is a reduction to any allowable Making Work Pay credit.

During 2009 the first $2,400 of unemployment benefits will not be subject to federal income tax. And families with three or more children may see an increase in their earned income credit in 2009 and 2010. The new law increases the eligibility for the refundable child tax credit in 2009 and 2010 by lowering the earned-income threshold to $3,000 from $8,500 in 2008.

Two provisions aim to encourage spending by providing tax benefits for first-time homebuyers and purchasers of new cars. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home, up to $7,500, by first-time homebuyers. The provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this credit were required to pay any amount received under this provision back to the government over 15 years or earlier if the home was sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for joint returns). The new law enhances the credit by eliminating the repayment obligation for taxpayers that purchase homes on or after Jan. 1, 2000 through November 2009, and increases the maximum credit to $8,000.

Taxpayers who purchase a new automobile between Feb. 17 and Dec. 31, 2009 will be allowed a deduction for Hawaii general excise taxes paid on their purchase. The benefit phases out starting with individuals earning $125,000 ($250,000 for joint filers). The deduction is allowed for those who itemize or take the standard deduction. However the deduction cannot be taken by a taxpayer who elects to deduct state and local sales taxes in lieu of state income tax.

These are just a few of the provisions that will benefit Hawaii residents. We will cover tax benefits for Hawaii businesses in our next column.

Deneen Nakashima is a senior tax manager for Grant Thornton LLP. She can be reached at Deneen.Nakashima@gt.com